"... changes in credit supply (bank loans) are a strong predictor of financial crises, particularly when these changes are accelerating... "

"Credit booms seem to often coincide with house price increases."

"House price run‐ups prior to crises are common."

"... the financial crisis of 2007‐2009 was not special, but follows a pattern of build‐ups of fragility that is typical."

"... banks cut back on credit supply, although the demand for credit also fell" and the availability of credit is how the real economy was harmed - companies reduced expenditures and cut employees

"The financial crisis of 2007‐2009 was perhaps the most important economic event since the Great Depression."

"The crisis was exacerbated by panics in the banking system, where various types of short‐term debt suddenly became subject to runs. This, also, was a typical part of historical crises. The novelty here was in the location of runs, which took place mostly in the newly evolving “shadow banking” system, including money‐market mutual funds, commercial paper, securitized bonds, and repurchase agreements. This new source of systemic vulnerability came as a surprise to policymakers and economists ..."

The report summarizes the mechanisms through which the relatively tiny (in global financial system terms) rising defaults in sub-prime mortgages set off a chain of contagion that almost brought down the global financial system and the dire real economy consequences we are still living with. The good and the faultless get side-swiped along with the bad and the guilty.

This kind of report is a salutary dispassionate counterpoint to ones like The Big Banks' Big Secret from the Canadian Centre for Policy Alternatives, which paints the Canadian government's intervention in providing liquidity, primarily through CMHC buying bank-owned mortgages, as a reprehensible and un-necessary bank bailout. Canada's actions were so minor in a global scale that it does not even figure as one of the 13 key countries in the IMF's Chapter III. Market Interventions during the Financial Crisis: How Effective and How to Disengage? referenced in the Gorton paper. Canada's actions were exactly in line with those of all the other countries, however. Canada, and Canadian banks, didn't cause the crisis but everyone has suffered, and could have suffered a lot more without intervention.